Recently, two important developments occurred that will help Oregon sustain a healthier and more prosperous future. The first involved key decisions the Oregon Public Employees Retirement System (PERS) board made to keep PERS on course to eliminate its unfunded actuarial liability (UAL) within 10 years. The second was Treasury’s recent announcement about steps we’re taking to advance the just transition away from carbon-intensive investments in the Oregon Public Employees Retirement Fund (OPERF) and promote better corporate governance.

PERS Board charts path that could eliminate unfunded pension liability by 2034

On Friday September 25th, the PERS board trimmed the base rates public employers pay into the state's public employee retirement system over the next two years by .35%. Board members also held the assumed investment return rate at the current 6.9%. Healthy OPERF investment returns in the past two years have made these decisions possible.

The implications are big for every Oregonian. PERS’ actuarial firm Millman projects the system’s UAL could be eliminated by 2034, if Treasury continues to generate returns in the OPERF portfolio that outpace the assumed rate over that time (on average). Eliminating the UAL would give retirees peace of mind knowing the PERS system would be fully funded, while reducing contribution rates for employers across the state. Schools and other public agencies would have to devote less of their budgets to paying pension costs.

We aren’t seeing dramatically lower PERS costs for public agencies yet. Public agencies won’t see significant rate reductions for another six years, until PERS is 90% funded. Today, even though PERS base rates will tick down, many public agencies and school districts still feel squeezed by their pension costs.  Pension obligation bonds, which have offset those rates for years, are expiring for 144 PERS-participating employers. That means those agencies are losing a funding source to mitigate their PERS rates.

In September, the Oregon Investment Council set new investment targets that are projected to generate returns of 7.3% over the next four years. Based on expert input, public equity and fixed income investments will receive the highest percentage of OPERF’s investments. Private equity will no longer get the highest allocation. This diversified investment strategy is projected to keep Oregon on track to fully fund PERS—and ease the budget challenges many public agencies still face. 

Expanding Treasury’s capacity to track greenhouse gas emissions and engage corporations on just transition issues

Last week, I addressed the Council of Institutional Investors annual conference in Boston, where I talked about the work Treasury is doing to manage the risks from carbon-intensive investments by engaging companies, fund managers, and other pension funds. At Treasury, we’re:

• Improving direct GHG emissions data collection, including data from private funds, to enhance our progress reports.
• Engaging companies on their transition strategies, as well as tracking the market for sustainability-focused managers who share Treasury’s approach.
• Facilitating collaboration with other institutional investors to address carbon accounting issues faced by large complex portfolios.

To do this, Treasury is hiring a senior investment officer, as well as contracting with EOS Federated Hermes and Oakledge Associates.

Climate risks and other social and governance issues are material to our investments. Managing these risks is vital to growing the pension fund. Companies that pay attention to these risks are likely to have better bottom line results over the long-term. When a company treats its customers, its workers, and its communities well over time, that company usually performs better for its shareholders as well. That overlap isn't a coincidence. It's just good management.

Highlighting Oregon’s $100 “Baby Grad” bonus for infants

I recently became a grandmother, which is one reason I was very excited to join Oregon Department of Early Learning and Care Director Alyssa Chatterjee at Yamhill County Coordinated Care’s Community Baby Shower, held last month in McMinnville. We were there to tell parents and expecting parents about the importance of saving early for a child’s educational future—and offer them a $100 “Baby Grad” bonus to help.

Oregon’s “Baby Grad” bonus offers families a $100 contribution when they open an Embark account before their child’s first birthday with as little as $25. Embark is Oregon’s official 529 education savings program, designed to make saving simple and accessible for all families.

I was excited to see so many English- and Spanish-speaking parents lining up learn more about the Baby Grad bonus and to sign up for an Embark account.

 - Elizabeth Steiner, MD, Oregon State Treasurer